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NZ economic growth may pick up: RBNZ survey

Economists boost growth outlook in RBNZ survey, inflation track more benign

By Paul McBeth

Nov. 23 (BusinessDesk) – Some 78 economists and strategists surveyed by the Reserve Bank are slightly more optimistic about the country’s forecast growth.

Respondents to the RBNZ survey of expectations are picking the economy to grow 2.5% over the 2011 calendar year, that’s 0.2 percentage points more than the annual forecast in the September quarter survey. Economists are predicting 0.4% growth in the 2010 September quarter, half of the central bank’s forecast in its latest monetary policy statement, and 0.6% expansion in the December quarter, 20 basis points more than the RBNZ estimate.

Annual inflation expectations were muted, with year-ahead forecasts falling half a percentage point to 3.4%, and two-year-ahead estimates steady at 2.6%. That’s faster than the central bank’s 2.2% prediction. Fewer respondents expect the consumer price index will climb above 5% than the September survey after government officials flagged a likely spike in inflation after the increase in consumption tax last month.

“We continue to view the assumption contained within the September MPS that two-year-ahead inflation expectations will decline over the coming years – despite the upcoming high headline CPI – as optimistic,” said Christina Leung, economist at ASB Institutional. “We see upside risks to the RBNZ’s CPI forecast and expect the RBNZ will become less comfortable with the inflation picture over the coming year.”

Economists expect the unemployment rate will decline to 6% by September next year, falling a further 0.4 percentage points the subsequent year. It is currently at 6.4%.

The next year will be another tough one for workers, who will see their wages continue to lag inflation with earnings growth of at 2.4%, though 2012 will see some of these losses erased as wage growth is forecast to accelerate to 2.9%.

Respondents didn’t see much change in the exchange rate, picking the kiwi dollar to trade at 77 U.S. cents at the end of March, and falling to 75 cents by the end of September. It’s projected to hold at 78 Australian cents by the end of September. The kiwi recently traded at 76.99 U.S. cents and 78.02 cents today.


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